OJSC Oil Company Rosneft Consolidated Financial Statements

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OJSC Oil Company Rosneft Notes to Consolidated Financial Statements (continued) 2. Significant Accounting Policies (continued) Comprehensive Income The Company applies SFAS 130, Reporting Comprehensive Income, which establishes standards for the calculation and reporting of the Company's comprehensive income (net income plus all other changes in net assets from non-owner sources) and its components in consolidated financial statements. As of December 31, 2008 the Company recorded other accumulated comprehensive loss in the amount of US$ 40 million (net of tax) which represents an unrealized loss resulting from the revaluation of available-for-sale investments. As of December 31, 2007 and 2006, there are no material comprehensive income items and, therefore, comprehensive income for 2007 and 2006 equals net income. Accounting for Buy/Sell Contracts The Company applies the Financial Accounting Standards Board’s ("FASB") Emerging Issues Task Force ("EITF") Issue No. 04-13, Accounting for Purchases and Sales of Inventory with the Same Counterparty, which requires that two or more legally separate exchange transactions with the same counterparty, including buy/sell transactions, be combined and considered as a single arrangement for the purposes of applying the provisions of APB 29, Accounting for Non-monetary Transactions, when the transactions are entered into "in contemplation" of one another. Accounting for Contingencies Certain conditions may exist as of the date of these consolidated financial statements which may further result in a loss to the Company, but which will only be resolved when one or more future events occur or fail to occur. The Company’s management makes an assessment of such contingent liabilities which is based on assumptions and is a matter of opinion. In assessing loss contingencies relating to legal or tax proceedings that involve the Company or unasserted claims that may result in such proceedings, the Company, after consultation with legal or tax advisors, evaluates the perceived merits of any legal or tax proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a loss will be incurred and the amount of the liability can be estimated, then the estimated liability is accrued in the Company’s consolidated financial statements. If the assessment indicates that a potentially material loss contingency is not probable, but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. However, in some instances in which disclosure is not otherwise required, the Company may disclose contingent liabilities or other uncertainties of an unusual nature which, in the judgment of management after consultation with its legal or tax counsel, may be of interest to shareholders or others. Taxes Collected from Customers and Remitted to Governmental Authorities Excise taxes are reported gross within sales and other operating revenues and taxes other than income taxes, while value-added tax is recorded net in taxes other than income tax liabilities in the consolidated balance sheets. 20
OJSC Oil Company Rosneft Notes to Consolidated Financial Statements (continued) 2. Significant Accounting Policies (continued) Recent Accounting Standards In April 2008, the FASB issued Staff Position ("FSP") FSP FAS 142-3, Determination of the Useful Life of Intangible Assets ("FSP FAS 142-3") with the objective of improving the consistency between the useful life of a recognized intangible asset under SFAS 142, Goodwill and Other Intangible Assets, and the period of expected cash flows used to measure the fair value of the asset under SFAS 141 (revised 2007), Business Combinations, and other US GAAP standards. FSP FAS 142-3 establishes additional factors to be considered by an entity in developing assumptions about renewal or extension used to determine the useful life of an intangible asset recognized under SFAS 142. FSP FAS 142-3 is effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. Early adoption is prohibited. The Company will adopt FSP FAS 142-3 effective January 1, 2009. The Company does not expect FSP FAS 142-3 to have a material impact on the Company’s consolidated financial position and results of operations. In September 2008, the FASB issued FSP FAS 133-1 and FIN 45-4, Disclosures about Credit Derivatives and Certain Guarantees: An Amendment of FASB Statement No. 133 and FASB Interpretation No. 45; and Clarification of the Effective Date of FASB Statement No. 161. FSP is intended to improve disclosures about credit derivatives by requiring more information about the potential adverse effects of changes in credit risk on the financial position, financial performance, and cash flows of the sellers of credit derivatives. The FSP also amends FASB Interpretation ("FIN") 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others, to require an additional disclosure about the current status of the payment/performance risk of a guarantee. The provisions of the FSP that amend FAS 133 and FIN 45 are effective for reporting periods (annual or interim) ending after November 15, 2008. Application of FSP FAS 133-1 and FIN 45-4 will not have a material impact on the Company's consolidated financial position and results of operation. In October 2008, the FASB issued FSP FAS 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset Is Not Active (“FSP FAS 157-3”) that applies to financial assets within the scope of accounting pronouncements that require or permit fair value measurements in accordance with FAS 157, Fair Value Measurements. FSP FAS 157-3 clarifies the application of FAS 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP FAS 157-3 shall be effective upon issuance, including prior periods for which financial statements have not been issued. Revisions resulting from a change in the valuation technique or its application shall be accounted for as a change in accounting estimate (FAS 154, Accounting Changes and Error Corrections). The disclosure provisions of FAS 154 for a change in accounting estimate are not required for revisions resulting from a change in valuation technique or its application. For additional information, see Note 26 — Fair Value of Financial Instruments and Risk Management. The Company does not expect FSP FAS 157-3 to have a material impact on the Company's consolidated financial statements. 21
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OJSC Oil Company Rosneft Consolidated Financial Statements

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